European Central Bank's Cheap Loans Hit Yields

3/2/2012 8:31AM

European peripheral yields fell following the ECB's $662 billion of cheap 1% three-year money. WSJ's David Enrich examines if the funds are having the desired effect and what banks are doing with it. Photo: Reuters

This transcript has been automatically generated and may not be 100% accurate.

I ... on Wednesday the European Central Bank provided European banks with an album passages of liquidity ... over five hundred billion euros of sheep one percent three ... yet money ... sort of these banks and doing with all this updated and this ... is big into two has basically been falling the money trail ... um ... and it is possible this is a was calm financial markets ... to help the euro zone economies ... this is what the ... I don't know what to do with the money so far the there's been some a positive impact seems and ... so what the what happened financial markets in Europe and around the world is busily confidence in and it ... the perception that the banks are more stable in catastrophe is an inverted ... he is enormously positive for the entire sector was also some early indications that the banks might be isn't least portions of this money to buy up ... a nice short dated government bonds and cash to expand in Italy the euro is ... I have we've already seen this but basically you know the bottle says of this but for for a successful the Eels let's people decrying so is there is some benefit coming from that stage ... this is that the women received about deposits of the European Central Bank ... record levels with the sun isn't getting billion euros ... banks face the ECB ... doesn't suggest without that business but it ... the ECB deposit facility has been a lot of tension in the press today on Twitter it's late enough to put it here ... red hair and honestly there's not that everyone knew was going to happen it is a mechanical issue which is too complicated to explain right now about ... inevitably if you increase the money supply to these banks as it inevitably leads to the short-term translates into an enormous set ... up ... an invisible friend or billion euros which is exactly almost to the doc ... also the euro what you decide to sell to the question though is not notice that the banks to receive the money Wednesday ... and rodents ... and loans on their cinema hall ... as anyone who's ever heard of mortgages into the intensive process you don't want that to just go willingly spending the money ... he wanted to be ... at the height of the most optimistic opens the bill marginally ... less not ... because the band to be a little more ... amenable to making loans previously ... it ... is crazy because I think you see with previous LTRO was on ... the of that was the impression that the fact that is making money ... for themselves with the trauma of it on ... to to the really funny but because they want to keep the stairs ... everybody's hoping that ... this this is for the euro the funding costs of those proof ruled that does that this is based on ... actually stopped declining in making life easy for those countries of the key thing that this expect them to me that people talk while it does seem to be ... then prepare the ECB and the banks it's already been very successful and if you look at the yields on Spanish veteran center tell him that it's gone from Blix if for some the shorter day the stock tumbled six percent two months of two percent of its ... I don't mind boggling Robin is down to ... levels that it is by most accounts are that they're not comfortable that are sustainable and viable and that ... and I think there is the question just how with the banks and the Senate has no one really knows I'm there was any reason to bomb the bank's incentive related to support them ... it was sort of all this week on Monday that but ... I love that Over Itanium Aneel we seen this image on the Standard burst every overshadowing higher than the shorter dated them but they haven't been a similarly ... steep downward slide is all that that is that such significant ... in the case of the confidence of the markets have in these countries read that they can keep it cannot be bid up to six months but they can to debate it ... confidence in investors know the banks don't have any reason at the bottom three years ago and investor tenure basis of really to sign ... that investors are taking a dozen very reassured that the banks are not up to some Linky love for the Fed helpless financial system is not going to implode ... and toads cokes and other investors nonbank investors to come back and the market is given to the above is the last three days of the sixty odd that goes on Sundays you that the ECB has since they don't like it ... all ... of these criticisms that houses with ... who will donate the hair on ... that issue ... I don't think I think everyone agrees basic is done the right and there's some and they averted a massive potential catastrophe in the first for this year with banks face legal us up ... there is concern about how with that of the long-term unintended consequence of this and how you mean banks all this money and investing in even the ECB acknowledges are really to the need to go back to the addiction says David thank you very much in the three ...